Case 9-25

1.

a
. Earrings Unlimited
Sales Budget
For the Quarter Ending June 30

  April May June Quarter Total

Forecasted unit
sales 65,000 100,000 50,000 215,000
Multiply: price
per unit $ 10.00 $ 10.00 $ 10.00 $ 10.00
Total Gross Sales $ 650,000.00 $ 1,000,000.00 $ 500,000.00 $ 2,150,000.00

b.

Earrings Unlimited
Schedule of Expected Cash Collections
For the Quarter Ending June 30

  April May June Quarter Total

$
Sales $ 650,000.00 $ 1,000,000.00 500,000.00 $ 2,150,000.00
Collections        
  February Sales      
  260,000*10% 26,000.00     26,000.00
  March Sales        
  400,000*70% 280,000.00     280,000.00
  400,000*10%   40,000.00   40,000.00
  April Sales  
  650,000*20% 130,000.00     130,000.00
  650,000*70%   455,000.00   455,000.00

  650,000*10%     65,000.00 65,000.00

  May Sales   -
  1,000,000*20%   200,000.00   200,000.00

  1,000,000*70%     700,000.00 700,000.00

  June Sales     -

  500,000*20%     100,000.00 100,000.00

Total $ $
Collections     436,000.00 $ 695,000.00 865,000.00 $ 1,996,000.00

Notes: 20% collection on the month of Sale

70% collection the following month of sale
10% collection on the second month following sale
c. Earrings Unlimited
Merchandise Purchases Budget

  April May June Quarter Total

Forecasted Sales in unit 65,000 100,000 50,000 215,000
Add: Desired Ending Inventory:
40% of the forecasted sale of
the next month 40,000 20,000 12,000 12,000
Required Total Inventory 105,000 120,000 62,000 227,000
Less Beginning Inventory: 40% of
: the month sale 26,000 40,000 20,000 26,000
Required Purchases in unit 79,000 80,000 42,000 201,000
X Unit price $ 4.00 $ 4.00 $ 4.00 $ 4.00
Required Purchase in dollars $ 316,000.00 $ 320,000.00 $ 168,000.00 $ 804,000.00

d
. Earrings Unlimited
Cash Disbursement Budget for Merchandise purchases

  April May June Quarter Total

Accounts payable 3/31
April Purchases  
  50% * 316,000.00  
  50% * 316,000.00  
May Purchases
  50% * 320,000.00  
  50% * 320,000.00  
June Purchases
  50% * 168,000.00  
Total Cash Bisbursements
100,000.00     $ 100,000.00
     
$ 158,000.00     $ 158,000.00
  $ 158,000.00   $ 158,000.00
       
  $ 160,000.00   $ 160,000.00
    $ 160,000.00 $ 160,000.00
       
    $ 84,000.00 $ 84,000.00
$ 258,000.00 $ 318,000.00 $ 244,000.00 $ 820,000.00
2
. Earrings Unlimited
Cash Budget
For the Quarter Ending June 30

  April May June Quarter Total

Beginning
Balance     74,000 50000 50000 74,000
Cash Inflows        
  Collections $ 436,000.00 $ 695,000.00 $ 865,000.00 1,996,000
Cash Available 510,000.00 745,000.00 915,000.00 2,070,000
Cash Outflows        
  Purchases 258,000.00 318,000.00 244,000.00 820,000
Sales Commissions (4%
  of Sales) 26,000.00 40,000.00 20,000.00 86,000
  Advertising 200,000.00 200,000.00 200,000.00 600,000
  Rent 18,000.00 18,000.00 18,000.00 54,000
  Salaries 106,000.00 106,000.00 106,000.00 318,000
  Utilities 7,000.00 7,000.00 7,000.00 21,000
  Purchases of Equipment   16,000.00 40,000.00 56,000
  Dividends paid 15,000.00     15,000
Total Outflows 630,000.00 705,000.00 635,000.00 1,970,000
Cash Balance before financing -120,000.00 40,000.00 280,000.00 100,000
Financing        
  Borrowings 170,000.00 10,000.00 0.00 180,000
  Repayments     -180,000.00 -180,000
  Interest     -5,300.00 -5,300
Total Financing 170,000.00 10,000.00 -185,300.00 -5,300
$
Cash Balance, ending $ 50,000.00 $ 50,000.00 $ 94,700.00 94,700.00

Notes: Interest Computation

April 170,000.00 12% 1,700.00 1,700.00 1,700.00 5,100.00

May 10,000.00 12%   100.00 100.00 200.00

Total           5,300.00
3. Earrings Unlimited
Budgeted Income Statements
For the Three Month Ending June 30

Sales in Unit 215,000

Sales $ 2,150,000.00
Variable Expenses
Cost of Goods Sold 860,000
Sales Commision 86,000 946,000
Contribution Margin $ 1,204,000.00
Fixed Expenses
Advertising 600,000
Rent 54,000
Salaries 318,000
Utilities 21,000
Insurance 9,000
Depreciation 42,000 1,044,000
Net Operation Income $ 160,000.00
Less: Interest 5,300.00
Net Income $ 154,700.00
4. Earrings Unlimited
Budgeted Balance Sheet
June 30

Assets
Cash 94,700.00
Accounts Receivable 500,000.00
Inventory 48,000.00
Prepaid Insurance 12,000.00
Property and Equipment,net 964,000.00
Total Assets 1,618,700.00

Liabilities and Shareholders Equity

Accounts (50% of June Purchase) 84,000.00
Dividends Payable 15,000.00
Capital Stock 800,000.00
Retained Earnings 719,700.00
Total Liabilities and Shareholders Equity 1,618,700.00
Notes:
Accounts Receivable Collectibles
May 1,000,000.00 10% 100,000.00
June 500,000.00 80% 400,000.00
Total 500,000.00

Inventory
June 12,000 $ 4.00 48,000.00

Prepaid insurance
July-October 3,000 4 12,000.00

Property and Equipment,net

Beginning, 3/31 950,000.00
Add: Purchases May 16000
June 40000 56,000.00
Less: Depreciation 14000 3 42,000.00
964,000.00

Retained Earnings
Beginning, 3/31 580,000.00
Add: Net Income(#3) 154,700.00
Total 734,700.00
Less: Divedends Declare 15,000.00
Balance, June 30 719,700.00